INTRODUCTION

This book is about the potential use of a numerical economic evaluation model called the QALY (Quality Adjusted Life Year) model in setting priorities in insurance plans for health care. Such plans may be either public or private. The former are tax-financed. They generally aim at providing access to necessary health care to all members of society regardless of their income. People who elect to have such schemes do so out of a combination of self-interest and a desire to help fellow members of society who happen to fall ill. Public schemes include national health services in countries all over the world, as well as, for instance, the Medicaid system in America. Private insurance plans are financed by premiums paid either directly by individual members of the plans or by the individuals' employers. Membership is voluntary and motivated by self-interest. In the United States the majority of health insurance is privately financed, whereas in most other countries private plans are supplementary to a national health service.

The point of both public and private insurance plans is to have members prepay for statistically predictable consumption of health care. Copayments made by patients at the point of consumption of health care are small or nonexistent. With such a payment arrangement, patients will tend to demand even such services as are of little or modest value simply because it costs them very little to do so. However, members of insurance plans are not interested in having their money spent on covering low-value services for other people. Nor do they consider it important for themselves to be insured in such a way as to receive such services free of charge.